W2 and 1099-MISC

[lyssalewis1]

My husband is clergy and receives a W2 for his salary at the church. In 2019, the church decided to start working with our local prison and providing transport to the work sites for the prisoners. The church is paid by the work sites and then the church pays my husband a portion as an independent contractor. He receives a 1099-MISC for this income and the amount is placed in Box 7- Non-employee Income.

My question is: does he qualify for the QBI (Qualified Business Income) deduction even though the church pays him for both sources of income. TurboTax is asking if the payer is a previous or current employer, which, of course it is. But, from my reading, since it is considered non-employee income, he qualifies? Please help me understand! Thank you in advance.

[DavidS127 · Accepted solution]

Because the work your husband is doing is not the same type of work or job for which he is paid W-2 wages, this self-employed business is eligible for the Qualified Business Income (QBI) deduction.

The reason TurboTax asks that question is that the IRS wants to prevent people switching from their W-2 job to doing the same work as an independent contractor, solely to take the QBI deduction.  The circumstance described for your husband does not fall into that category.

[lyssalewis1]

Thank you for your response! I was also wondering how/if we can write off the mileage for the W2 clergy income in TurboTax Self Employed? Every time it asks me if I want to write off mileage under the 1099 income, which I do not.

[DavidS127]

The unreimbursed mileage expenses for a W-2 employee are no longer deductible.  If your husband reports other income from his religious work not reported on a W-2 (e.g., weddings, etc.) he will report that as self-employment income on a Schedule C, and any vehicle expense for that work can be deducted on that Schedule C.